Texas Reverse Mortgages: The Basics
While Texas is the second largest state in the U.S., it’s actually a newcomer to the reverse mortgage game. In fact, due to homestead laws enshrined in the Texas state constitution, reverse mortgages weren’t even legal in Texas until around 20 years ago. However, in 1997, Texans voted to change the constitution to allow for reverse mortgages. Due to the fact that Texas has only legalized reverse mortgages in the last two decades, lawmakers had many years to observe the problems apparent for reverse mortgage borrowers in other states.
For that reason, Texas has a variety of additional borrower protections, and is considered by many to be the safest state in the U.S.. to get a reverse mortgage. In fact, there have been no enforcement actions against reverse mortgage lenders in the last 10 years, which is a major testament to the safety of reverse mortgages througout the state.
Both HECMs and Proprietary Reverse Mortgages are Available in Texas
In Texas, like other states, both FHA-insured HECMs (Home Equity Conversion Mortgages) and proprietary reverse mortgages are available for borrowers. HECMs typically have lower interest rates than their proprietary counterparts, as well as having greater borrower protections. For instance, if a reverse mortgage borrower dies or moves to a nursing home, an HECM will allow the non-borrowing spouse to stay in their home, provided they meet certain qualifications and re-certify themselves as an eligible spouse each year. HECMs are also non-recourse.
In contrast, proprietary reverse mortgages typically have higher interest rates than HECMs, and may or may not have protections for non-borrowing spouses. While many proprietary reverse mortgages are non-recourse loans, not all are. One popular type of proprietary reverse mortgage available to qualifying Texas homeowners is a jumbo reverse mortgage. Jumbo reverse mortgages, which are usually offered to those with homes valued at more than $1 million, permit borrowers to take out far more than the current FHA reverse mortgage lending limit of $679,650. In fact, borrowers with enough home equity may be able to take out up to $3 million in funds from a jumbo reverse mortgage loan.
Other Information About Reverse Mortgages In Texas
Since Houston is the largest city in Texas, it’s no wonder that it’s one of the most popular locations to get a reverse mortgage in Texas. However, borrowers should be wary that not all reverse mortgage lenders in the area may be credible. For instance, Reverse Mortgage Solutions, a company located in the Houston area, has numerous complaints about it online and a concerning 1.5/5 rating on Google. In general, no matter where you’re looking for a reverse mortgage, you should be careful to do independent research and verify the reputation of the lender you want to work with.